Creating Your Budget
By Gail Doby, ASID
CVO & Co-Founder, Gail Doby Coaching & Consulting & Design Success University
Many designers want to know how to earn more money from their business. I tell them it starts with establishing a budget. It’s a lesson new business owners often learn the hard way after years of bringing in a lot of revenue and realizing less profit than they had hoped. It does not matter how much work you are getting. If you are spending more to do business than you are earning, you can’t make a profit. A budget helps you to anticipate and control expenses so you don’t find yourself in a hole at the end of the year.
In creating your budget, start with the biggest expenses first. I recommend beginning with marketing, as these are sunk costs that can quickly add up. Think about the categories that are the most expensive, such as photography, website design, social media portfolios, branding, and possibly PR or content development. Some of these may be annual costs and some may incur monthly or quarterly. Don’t underestimate what you will need for marketing. There is a lot of competition out there.
Next, determine payroll expenses. Unless you are working strictly solo, this is always the biggest portion of your expense budget—salaries, taxes, insurance and other compensation or benefits, and professional development. Include any anticipated outsourced or freelance services, as well. It is essential that you budget properly for employee expenses, especially if you are considering adding staff sometime during the year (in which case, be sure to budget for the cost of recruiting and training, too).
Don’t forget to pay yourself! That may sound obvious, but many owners do not include their own compensation when compiling their budget. They assume it will come from whatever is “left over” at the end of the year. That’s when they start to fret about how little they are making. Whether it’s in the form of a salary or a draw, calculate your worth to your business and budget to compensate yourself appropriately. Include your own professional development expenses.
These three categories along with your overhead expenses (rent or lease, utilities, supplies, professional services, transportation, travel, dues and fees, etc.) will make up the lion’s share of your expense budget. Once you have established those, budget for the amount of profit you are seeking after all expenses are paid. You now have a target for what you need to earn to come out on top at year’s end, and a useful guide to help you manage your cash flow.